Trade gap swells on imports from China, India

Trade gap swells on imports from China, India

By Shahid Iqbal
KARACHI, May 31: Pakistan has doubled its trade with India and increased exports to China during the 10 months of current year but the volume of trade has put more pressure on the country’s widening trade deficit.Both India and China put a cork over imports flow from Pakistan while the country failed to exploit the fastest growing economies of the region in its favour, apparently due to lack of strategy.The available official trade figures showed that India surpassed even the ambitions trade target of $20 billion with China to reach $24.9 billion last year.Pakistan’s trade volume with China reached $2.062 billion only during the first ten months of the current year. Out of this total, exports from Pakistan were just $379 million while China’s exports were in the tune of $1.647 billion. Pakistan has been facing a trade deficit of $1.268 billion.Pakistan’s imports from India have doubled during the first ten months, while exports to the country remained limited to $196 million. Indian exports to Pakistan reached $912m during the ten months of the current year compared to $419 million during the corresponding period of last year.The statistics showed that the Pakistani policy makers have yet to come out with a strategy to improve their trade relations with the regional countries and exploit the unique long-term friendly relations with China.On the other side, India mended its territorial disputes with China and sharply increased trade with that country becoming the 10th largest trade partner of China, while China became 2nd biggest trade partner of India within seven years.The miracles happened just next door to Pakistan but the lack of initiative left the country far behind the pace of economic development in the region resulting in record widening of trade deficits. The situation kept the country under pressure of Western countries begging for export incentives while opening its own market at their own terms.Pakistan’s trade loss with India reached $716m during the ten months but soon it could reach $1 billion as imports have increased sharply in the recent months.China and India will finish a joint study on a potential regional trade pact by October this year, which could play a key role in further enhancing of trade.China said the study would play a key role in the economic integration in Asia if it led to a regional trade pact linking China and India.The two countries signed an agreement in 2005 pledging to bring bilateral trade volume to $20 billion by 2008. This was achieved ahead of the targeted date and the two governments have now set a new target of $40 billion in bilateral trade by 2010.In April 2007, Pakistan signed 27 agreements in Beijing, which included setting up a Chinese automobile plant, an engineering university in Pakistan and a joint investment company with a capital of $200 million.Pakistan’s prime minister recently visited China to explore trade and investment opportunities but the output can only prove the fruitfulness of the visit.

US ’copters violate Pak airspace

US ’copters violate Pak airspace
Updated at
-->By Mushtaq YusufzaiPESHAWAR: US helicopter gunships violated Pakistan’s air space for the second time in less than a week by intruding at least five kilometres inside the restive North Waziristan tribal agency on Wednesday, residents and officials told The News.Two helicopter gunships crossed the Pakistan-Afghanistan border in the Lowara Mandi town of North Waziristan. “Both the choppers came at around 9:45 a.m. and returned to Afghanistan after flying over the town for 15 minutes,” an eyewitness told this scribe by telephone from the area. He said it created panic among the residents of the Pakistani border town. Sources said the Pakistani security forces deployed in the area did not retaliate. According to local tribesmen, it was the second time that the US military violated Pakistan’s air space. “Two American B-52 aircraft entered the same town at around 3:15 a.m. in the wee hours of Sunday, and flew over the town for five minutes,” a resident said.When approached, Director-General Inter-Services Public Relations (ISPR) Maj-Gen Waheed Arshad said he did not have any information of air space violation but argued that sometime when operation against the Taliban is going on inside Afghanistan close to the Pakistani border the coalition forces mistakenly enter our territory.“Since the border is not well-defined there and then the area is mountainous, therefore, they sometime cross the border but it has never been a deliberate attempt,” said Maj-Gen Waheed.

Pakistani government cooking the books

Undermining data integrity
By Dr Kaiser Bengali

Data has a critical place in policymaking. It is on the basis of analysis of data that policymakers are enabled to identify emerging problems, the source and nature of such problems, and adopt appropriate remedial measures.The importance of data is such that the collapse of the Soviet Union is traced in part to the generalised distortion of economic data. To cite one instance, the Soviet Union had instituted a system where industry managers were provided production targets and received bonuses if the target was exceeded. This created a perverse incentive to report higher output than actual.The over-reporting of output became so pervasive across the vast country that policymakers in Moscow no longer had the correct picture of the quantity or composition of output in the economy. Bereft of accurate data, their decisions became increasingly unrelated to realities on the ground and, in effect, irrelevant to determining the course of the economy – and the country. More recently, the distortion of intelligence data by the Bush Administration in the US has led to a situation where the world’s sole superpower is facing a certain defeat in Iraq.Developing countries are unable to devote sufficient resources to match the extensive databases of the developed countries. Nevertheless, many developing countries have over time significantly improved their data collection and reporting systems with a view to enhancing their capacity for analysis and decision-making. Pakistan stands out as an exception, where the data regime has suffered a regression, particularly during the last half-decade. A measure of this regression can be made from the fact that the position of the Director-General of the Federal Bureau of Statistics – the principal data collection and production agency – has remained vacant since June 2003.The absence of the Director-General has exposed middle ranking FBS officials to direct pressure from senior finance ministry officials to “massage” the data to suit the regime’s purposes. A review of data problems over the period 2002 to 2006 brings forth two disturbing aspects of the state of affairs: one is deliberate distortion of data and the other is misrepresentation of the data. This is a sorry legacy that General Musharraf’s economic managers are likely to leave behind.Customs duty receipts: Instances abound. The ability to achieve and even exceed tax revenue targets has been heralded as one of the hallmarks of success of the Musharraf regime’s economic managers. However, there are aspects of tax data that raise serious questions. One of the federal budget documents, the Explanatory Memorandum on Federal Receipts, reports data on Customs Duty receipts for 12 specific commodity groups. A perusal of the said documents for the years 2000-01 to 2005-06 shows an inexplicable phenomenon.The Explanatory Memorandum 2001-02 shows that for seven out of 12 items revised receipts for 2000-01 are uniformly 7.3 per cent lower than budgeted receipts for the year. And the Explanatory Memorandum 2006-07 shows that for all the reported items revised receipts are uniformly higher than budgeted receipts by 10.25 per cent (Table 1 on P. IV). Further, over the fiscal years 2002-2006, growth in customs duty receipts for at least 10 out of 12 items is a uniform 3.1 in 2002-03, 9.7 in 2003-04, 27 per cent in 2004-05, and 17.3 percent in 2005-06 (Table 2 on P. IV). The uniformity across commodities in the percentage difference between revised and budgeted figures and with respect to percentage change in receipts is clearly not plausible and it appears that the data has been ‘created’ by applying a uniform growth rate for each year.Fiscal deficit: Managing the fiscal deficit has also involved an element of creative accounting. The Budget for the fiscal year 2003-04 showed fiscal deficit for 2002-03 at 4.2 per cent. This, it appeared, was an underestimate on account of what may be called the ‘KESC factor’. The Budget reported a receipt of Rs57.3 billion under the head "Recovery of Investment from KESC" and an entry of Rs57.7 billion on the expenditure side under the head "Unallocables". It is understandable for budgeted expenditures for, say, emergency relief to be placed under the ‘Unallocables’ head; but an expenditure that has already been incurred is clearly identifiable and for it to be reported as ‘Unallocable’ was found to be intriguing.Enquiries revealed that neither had the government received this amount from KESC, nor had the government incurred this expenditure. The two corresponding receipts and expenditure items were merely accounting entries that cancelled each other out, with no net accounting impact on the budget. The implication of these ‘mutually cancelling out’ entries was, however, meaningful. Essentially, the entry on the receipts side absolved KESC of its liabilities to the government to the extent of Rs57.3 billion. By showing a corresponding entry on the expenditure side, the government had effectively written off KESC's losses. The subterfuge served the purpose of under-reporting the fiscal deficit. The correct procedure would have been to just have one entry on the expenditure side to reflect the writing off of the KESC debt. In the event, however, the fiscal deficit would have risen to 5.6 per cent – which was the actual fiscal deficit for 2002-03 – instead of 4.5 per cent as claimed (see Table 3).GDP growth rates: Creative accounting also appears to have been applied to arriving at the desired economic growth rates. The principal government publication that provides a detailed and comprehensive empirical documentation of the state of the various sectors and aspects of the economy is the Pakistan Economic Survey. Usually produced on the eve of the presentation of the annual budget, the Economic Survey provides provisional figures for the current fiscal year and revised figures for the preceding fiscal year. The provisional figures are estimated on the basis of 9-10 months data that is available at the time the Survey is finalised for publication.The revised figures are based on the un-audited data for the 12 months of the preceding fiscal year. Dividing the provisional year figure (the numerator) by the revised year figure (the denominator) provides the growth rate. Higher the denominator, lower the growth rate and vice versa. As such, the upward or downward correction of the denominator – the revised figure — can lower or raise the current year growth rate.This device has been increasingly used in recent years to manipulate growth rates to desired levels. For example, the Economic Survey 2002-03 reported GDP growth at 5.1 per cent. The last year when GDP growth was above five per cent was in 1995-96, when it stood at 6.6 per cent. Coming in the wake of rather poor performance of the economy after 1996, the whiff of recovery was welcome. However, questions arose as to the actual magnitudes of growth; questions with respect to the consistency and reliability of data and estimation methodology upon the basis of which the growth rates were claimed.The preceding year’s Economic Survey (2001-02) provided provisional figures for the year 2001-02, which were updated and presented as revised figures in the Economic Survey 2002-03. This is standard practice. Given that provisional figures are annualised estimates – based on 9-10 months data – it is understandable that the revised figures will vary somewhat from provisional ones. Relatively greater variations can be accepted in, say, crop agriculture, on account of crops that are harvested in the last quarter of the fiscal year, and whose output projections can go awry because of natural factors.For other sectors, however, estimates for 2-3 months are unlikely to change too widely from the monthly average of 9-10 months data. This is the case in, say, public administration and defence, where the value addition accrues largely from salaries – and monthly salaries for the last 2-3 months of the year are unlikely to vary significantly from that in the preceding 9-10 months.A perusal of national income data indicates substantial variation between the provisional and revised growth rates. For the year 2001-02, provisional fishing sector growth of four per cent turned was revised into negative 12 per cent, 3.8 per cent provisional growth in finance and insurance expanded to 16.9 per cent revised growth, and 18.2 per cent provisional growth in public administration and defence collapsed to 6.5 per cent growth in revised terms (see Table 4). Such large corrections indicate that the process of compilation and tabulation of data in the preceding year was not carried out with the required level of accuracy. In the event, the precision of current year’s estimates are also thrown in doubt.The public administration and defence, finance and insurance, and fishing sectors then accounted for seven, two and 0.9 per cent of the economy. Clearly, the impact of any manipulation in the public administration and defence sector is greater. Provisional estimates of value addition in the public administration and defence sector in 2001-02 was recorded at Rs50,217 million, which was revised downwards by nearly Rs5 billion or nine per cent to Rs45,256 million. Such a significant decline in value addition in the sector during the last quarter of the fiscal year is questionable.The impact of this revision was two-fold. One, reporting provisional public administration and defence sector growth for 2001-02 boosted the GDP growth rate for the year. And two, the downward revision of the 2001-02 sectoral growth rate from provisional 18.2 per cent by as much as two-thirds to revised 6.5 per cent allowed the 2002-03 rate of growth in public administration and defence to be shown at positive 5.2 per cent. If, however, the 2002-03 growth rate is calculated on the basis of the uncorrected provisional 2001-02 growth rate of 18.2 per cent, the 2002-03 growth rate for the sector turns out to be negative 5.2 per cent!Likewise, the overall GDP growth rate is also affected. Based on the revised 2001-02 figures, the 2002-03 GDP growth rate is reported at 5.1 per cent. Based on the provisional 2001-02 figures, the GDP growth rate appears to be half percentage point lower at 4.6 per cent. It appears that economic managers were aiming to produce a five per cent plus GDP growth rate.Poverty estimation: Poverty is now a political issue and official poverty estimates have continued to vary, thereby casting doubts on their veracity. The Economic Survey 2002-03 reported the 2000-01 poverty head count ratio at 32.1 per cent, which was revised downwards in the Economic Survey 2003-04 to 27.3 per cent. However, a 2005 publication of a government agency – the Center for Research on Poverty Reduction and Income Distribution – revised the 2000-01 poverty rate upwards to 34.45 percent.Further, the Economic Survey 2003-04 reported the poverty rate to have reduced by 4.2 percentage points to 23.1 per cent in 2004, while the Economic Survey 2005-06 reported poverty at 23.9 per cent. The 10.6 percentage point reduction of poverty from 34.45 percent in 2000-01 to 23.9 per cent in 2004-05 translates to a 31 per cent decrease or a six per cent decline in poverty per year.The heroic nature of the claim merited a closer look at poverty data. Given the availability of the required level of disaggregated data, it was possible to analyse as to how the 4.2 percentage point decrease in poverty, claimed in 2003-04, was estimated. And it appeared that creativity had also extended to sampling the data for analysis.A perusal of the method by which the poverty decline estimate had been arrived at showed that it was conceptually and statistically inconsistent. Given the government's unwillingness to accept the results of the Pakistan Integrated Household Survey (PIHS) 2001, which showed a rise in poverty between FY1999 and FY2001, the government conducted an alternative Household Consumption Expenditure Survey (HCES) in 2004. This survey, carried out over the 18-day period April 19 to May 6: 2004, sampled 5,046 rural and urban households in the four provinces of the country.The HCES 2004 data was tabled against the segment of the PIHS 2001 data collected over the same 18-day period, i.e., April 19 to May 6. The total PIHS sample comprises 14,536 households, of which 1,096 (614 rural and 482 urban) households were surveyed during this 18-day period. Statistically, the standard error of a 1,096 households sample is significantly larger than that of a 14,536 household sample, compromising the accuracy of the results.Moreover, while the FBS sampling methodology is meticulous and ensures statistically representative coverage of the 14,536 households surveyed, it is certainly unlikely that there was an attempt to ensure the overall representativeness of the 1,096 households surveyed during the particular 18 days. It is possible that, if 100 households are to be surveyed in a territorial unit over a period of 30 days, the enumerators survey one part of the area that is either wealthier or poorer during, say, the first two weeks.In the event, the partial sample will be biased. Clearly, therefore, the HCES 2004 sample and the PIHS 2001 sub-samples are not comparable; rendering the result conceptually and statistically flawed. The exercise amounts to subjective selection of data in order to produce pre-determined results. Under the circumstances, the current even more historic claim of reduction in poverty by nearly one third is also rendered questionable.Maintaining the integrity of data is of paramount importance for planning and policy decisions and for ensuring the overall health of the economy. It is the purpose of this article to highlight the fact that this integrity is under threat and that it is imperative that the entire process of data collection, tabulation and publication is rendered free of political manipulation. This requires that, as s first step, the Federal Bureau of Statistics and the provincial statistical bureaus are made into autonomous organizations – a la State Bank of Pakistan – to ensure that these publicly funded, public organisations are devoted to the service of the state rather than servitude of a government.

No business like mil–business

No business like mil–business

Khalid Hasan

privateview

In a country where it is still illegal to photograph a bridge or to be found hanging around the road that leads to the Bum factory, it is amazing that the young female academic Ayesha Siddiqa should have written a book laying bare the Pakistan Army’s inner economy and providing the first documented account of the vast commercial empire it has built with public money. So secretive is Pakistan’s defence establishment that the National Assembly is not permitted – even under civilian governments – to debate its budget or question its spending. Nor is anyone authorised to look into the Army’s enterprises. If anyone is looking for a state within a state, he need not look any further. All he has to do is to come to Pakistan.Ayesha Siddiqa’s book Military Inc.: Inside Pakistan’s Military Economy had long needed to be written but wasn’t because those who had the ability or the knowledge to write it considered discretion the better part of valour. How the Army will react to her findings, I am unable to predict. Since her facts are well supported, I suspect they will simply be ignored. However, I do hope a copy of the book will be available in every station library in every cantonment. According to the author, the commercial empire of the Pakistan Army has a net worth of Rs 200 billion. The term she has coined for the Army’s commercial and business activities is Milbus, which is shorthand for ‘military business.’ She defines Milbus as military capital used for the personal benefit of the military fraternity, especially the officer cadre, which is not included as part of the defence budget or does not follow the normal accountability procedures of the state, making it an independent genre of capital. It is directly or indirectly controlled by the military. She writes that this unaccounted transfer of resources can take many forms. She lists them as: state land transferred to military personnel, resources spent on perks and privileges for retired personnel, business opportunities diverted to armed forces personnel by flouting the norms of a free market economy, and money lost on training personnel who seek early retirement to join the private sector.Ayesha Siddiqa maintains that a study of Milbus is important because it causes the officer cadre to be interested in enhancing their influence in the state’s decison making and politics. This military capital also becomes the major driver for the armed forces’ stakes in political control. She writes, “Pakistan’s military today runs a huge commercial empire. Although it is not possible to give a definitive value of the military’s internal economy because of a lack of transparency, the estimated worth runs into billions of dollars. The Fauji Foundation and the Army Welfare Trust are the largest business conglomerates in the country. Besides these, there are multiple channels through which the military acquires opportunities to monopolise national resources.”Ayesha Siddiqa makes three major points. First, that Milbus is military capital that perpetuates the military’s political predatory style. This capital is concealed, not being recorded as part of the defence budget and it involves unexplained and questionable transfers of resources from the public to the private sector, especially to individuals and groups that have the inside track. Second, the military’s economic predatoriness increases in totalitarian systems. The armed forces encourage policies and related environments that multiply their economic opportunities. Milbus becomes part of the tribute that the military extracts from providing services such as national security. Since the armed forces ensure territorial security, they believe that anything that contributes to their welfare is justified. At times, the military convinces the citizens to bear additional costs on the basis of a conceived or real threat to the state. Third, the military’s economic predatoriness is both a cause and an effect of a feudal, authoritarian and non-democratic political system. In the process of seeking benefits, those in power give a blank cheque to other elite groups to behave in a predatory manner.The author argues that the elite groups in society have their own reasons to turn a blind eye to the military’s economic interests. In politics dominated by the military, other dominant groups often turn into cronies of the armed forces to establish a mutually beneficial relationship, as has happened in Pakistan every time the military has been in power. Monopolies, caused by illegal military capital result in market distortions, place a burden on the public sector because of the hidden flow of funds from the public to the private sector. Since the military claims Milbus activities to be legitimate, funds are often diverted from the public to the private sector, which can and does include the use of military equipment by military-controlled firms and the acquisition of state land for distribution to individual members of the military fraternity for profit making.A friend of mine, Tariq Jazy, says that when he looked up the word ‘army’ in the Concise Oxford Dictionary, he found it defined as an “organised force armed for fighting on land.” This definition, he added, he has modified in line with Pakistan’s requirements, and it now reads, “an organised force armed to fight for land.” Ayesha Siddiqa writes that the military is a significant stockholder in agricultural land. Out of the 11.58 million acres that is controlled by the armed forces, an estimated 6.9 million acres, or about 59 percent of the total land, lies in rural areas. The military is the only department of the government that has assumed the authority to redistribute land for the benefit of its officials, having distributed about 6.8 million acres among its cadres for their personal use. When a dispute arose over the Okara farms when the Army wanted to throw out the sharecroppers who had cultivated that land for generations, Army spokesman Maj. Gen. Shaukat Sultan said, “The needs of the Army will be decided by the Army itself and/or the government will decide this. Nobody has the right to say what the Army can do with 5,000 acres or 17,000 acres. The needs of the Army will be determined by the Army itself.” So there, in a nutshell, you have it.Ayesha Siddiqa concludes, “An authoritarian system in which the military has a dominant position is hardly the panacea for Pakistan’s political problems, nor does it help the long-term interests of the country’s strategic external allies. A politically strong Pakistan will also be a stable Pakistan, which will not be detrimental to the South Asian region or the world at large.” She also points out that the military has been central in nourishing the religious right without necessarily realising the strength of religious ideology as an alternative to itself.But let me close this with another observation from my friend, Tariq Jazy. “In Pakistan, the military has been civilianised and the civilians have been militarised.”
– This is a regular column by TFT’s Washington correspondent. He can be reached at khasan2@cox.net

Military-run welfare outfits dependent on state bailouts

Military-run welfare outfits dependent on state bailouts
By Khalid HasanWASHINGTON: With the three major armed services welfare foundations not willing to provide data about their activities, it is difficult to assess the extent of their contribution to welfare, but what is known suggests that they are inefficient and dependent on state bailouts, according to Dr Ayesha Siddiqa’s new book, Military Inc.The four welfare foundations she studied are the Army Welfare Trust (AWT), the Fauji Foundation (FF), the Bahria Foundation (BF) and the Shaheen Foundation (SF). Compared with the Fauji Foundation and the Army Welfare Trust, there is very little information available on the SF and BF. The author argues that the military welfare system creates its own set of problems, the most prominent being the “politics” of the distribution of military welfare as it contributes to the existing imbalance of resources between the various provinces. Since 75 percent of the armed forces come from the Punjab, that is where much of the welfare activity is concentrated to the frustration of minority provinces. “The welfare system, or the set of perks and privileges provided to the armed forces, is part of the greater distributive injustice that the country suffers from,” she adds.Dr Siddiqa writes, “Milbus (military business) has grown exponentially. It is a segment of the military’s economy which is largely hidden from the public and not subject to the government’s accountability procedures. Moreover, it serves the interests of a select group of people. A combination of these two features of Milbus makes this capital inherently illegal. An increase in the military’s economic power is directly proportional to its political power.” Many of the economic operations undertaken pose a burden on the defence budget and the larger national budget. It also encourages “crony capitalism” and hampers the growth of a free market economy. According to Dr Siddiqa, the military’s commercial ventures are not cost-efficient. Because of a lack of transparency, it is not possible, she points out, to gain access to updated financial information, which is why her study of the armed services’ welfare activities is confined to data obtained for the years 1998-2001. Since the four foundations were set up under the charities law, their accounts are not auditable by the Auditor General of Pakistan. The AWT set up in 1971 with just Rs 0.7 million was worth Rs 17.45 billion in 2001 and was running 31 projects. It had to be bailed out financially at least twice. The Fauji Foundation (FF) has been considered a better performer than the AWT and PAF and Pakistan Navy foundations. The FF currently, which runs 12 projects, has a capital of Rs 43.32 billion. Four of the projects did not make any money in 2001. All three of its sugar mills ran in loss totaling Rs 58.42 million. The author recalls that when a parliamentary committee summoned FF chairman Gen Muhammad Amjad to appear and explain the controversial sale of one of the FF sugar mills, he refused to appear. He told the author in one of her four interviews, “No one has the moral authority to question the military or run the country. Are the politicians trained for their job?” The government’s economic survey shows that since 2003 the FF was consistently subsidised to the tune of over Rs 1 billion annually. No other private sector organisation has been provided with help in the form of loans and financial guarantees as the FF has.The research found very little information on the two foundations run by the Pakistan Air Force and the Pakistan Navy. The former set up an airline but it was a financial disaster and it had to be sold, although it constantly used public resources without compensating the government. Over the years, the state has lost money because of the military’s appropriation of urban and rural land for distribution amongst military personnel. The study found that the conversion of state land from defence to commercial has increased under the Musharraf government. The study also came upon evidence of inefficiency in the Frontier Works Organisation (FWO), which challenges the military’s claim regarding its efficient running. Dr Siddiqa writes that the data regarding the performance of the four foundations is largely hidden from the public. The defence establishment, she argues, is not an agent of development as it likes to think. She also writes about the comfort technocrats such as former State Bank governor Ishrat Hussain feel towards military regimes and vice versa. She calls the military bureaucracy a “short-time troubleshooter.” She argues that the millitary’s direct involvement in economic development through its business complex has an opportunity cost and creates market distortions. Milbus exacerbates cartelisation in the corporate sector.

Why corporate sector remains stunted

Why corporate sector remains stunted

By J.M.Shaikh

RECENTLY, there has been a sudden increase in international focus on the Indian corporate sector. This has been triggered by significant events like the acquisition of Arcelor by the Mittal Group and Corus Steel by the Tata Group. This has brought increasing realisation in Pakistan that the Indian corporate sector is now in a different league as compared to Pakistan’s corporate sector.Some have considered it important to go through a process of introspection for identifying reasons for the relatively poor state of Pakistan’s corporate sector. Apologists for the delinquent performance of Pakistan’s corporate sector have frequently held Zulfikar Ali Bhutto’s nationalisation policy responsible. Mr Shahid Javed Burki is one contributor to this line of thinking, not realising that proffering “soft alibis” is not only music to the ears of our business leaders but masks the real cause behind the lacklustre performance of the corporate sector.This article tries to put the nationalisation policies of the Bhutto era in a proper perspective and delineates the real reasons behind the prevailing malaise in the corporate sector. It is particularly important to set the record straight since the Indian experience confirms that despite nationalisation in India and a large public sector, the corporate sector has continued to march forward. It is natural, therefore, to ask why the position is different in Pakistan.According to conventional wisdom, private sector management is inherently superior to public sector management. However, there is little empirical evidence to support the veracity of this hypothesis in Pakistan.A brief survey of the corporate landscape in Pakistan reveals that while the banking sector does, indeed, represent a successful transformation triggered primarily by change of management from public to private sector through privatisation, other corporate achievers like PSO, PARCO, OGDC and the two Suis are all in the public sector as was the National Refinery till recently.It is also important to look at the post-privatisation performance of privatised enterprises. Performance of privatised banks supports this hypothesis, as does the post-privatisation performance of Millat Tractors, Balochistan Wheels and D.G. Khan Cement.At the same time, there are countless examples of units showing deteriorating performance in the post-privatisation phase. These include Bankers’ Equity, Zeal Pak Cement, Ghandhara Industries, Pakistan PVC and Sind Alkalis, not to mention others shut down after privatisation.Another common fallacy explaining poor corporate performance is that nationalisation retarded the development of managerial and technical skills. A serious examination reveals that nationalisation, in fact, enlarged the pool of professional managers.The most significant aspect of nationalisation during the 1972 to 1974 period was the clear strategy to take over ownership control but not the management of nationalised industries. In that early phase, nationalisation did not imply the replacement of professional managers by bureaucratic nominees.As a deliberate policy, the first step after nationalisation was to replace the owner chief executives by the senior-most professional managers in the nationalised enterprise. Serious efforts were also made to induct outstanding professionals and distinguished entrepreneurs in senior management level positions.This strategy generated a huge reservoir of commitment and enthusiasm from professional management. As a consequence, there was a turnaround in performance in nationalised units with peak levels attained in 1974-1975. Since then, there was a gradual but perceptible deterioration not only because of whimsical changes in key personnel but more importantly because of the failure of the administrative structure (ministry of production/BIM) to effectively monitor performance and evaluate outcomes linking these to an appropriate incentive system.Despite this environment, some public sector-managed enterprises continued to perform well because of the individual chief executive’s commitment and integrity. At the same time, however, even the best of professional managers under public sector management continued to be victims of policy imperatives.Let us analyse the nature of manufacturing enterprises nationalised in 1972. These were largely modest in size and in operations. Another common feature was the near absence of professional management. Even in the case of the National Refinery, owing to product monopoly, no need was felt for establishing any marketing platform. In the automobile sector, companies were largely assembly operations. In other sectors — cement, light engineering and chemicals — the manufacturing processes were simple and there were few marketing challenges, given a captive local market and high tariff barriers against imports.In terms of financial performance, some of the companies had done well, but principally on account of very high tariff protection, subsidised raw material prices, tax incentives and near-oligopolistic positions. Financial performance, therefore, was not a reflection of entrepreneurial ability or managerial skill.With import substitution as the mantra of Ayub Khan’s policies and the “bonus voucher scheme” providing the facilitating mechanism, many of these industries continued to make financial profits even while operating considerably below the optimum capacity utilisation.While many economists continue to wax lyrical about Pakistan’s industrial success during the Ayub era, there seems to be reluctance on their part to reflect on the benefits of that era to the country. When evaluated against revenue generated for the government in terms of taxes, benefits for the workers in terms of wages and working conditions and benefits to minority shareholders in terms of distribution of dividends, the so-called golden decade of the 1960s does not show a pretty picture.It follows, therefore, that beyond ideological commitment, the government of Zulfikar Ali Bhutto had practical reasons to consider nationalisation as a viable option for a transformation of the industrial base of the country.The broad objectives of nationalisation of his government included introduction of professional management, enhancement of local value addition and control on prices. Let us examine the extent to which these objectives were achieved.The demand for professional management increased with nationalisation and this was met both through in-house training as well as by public sector institutions. There was a conscious effort at increasing local value addition. Prices were also kept in check as evidenced by price stability over a long period in at least two commodities: cement and vegetable ghee. The other societal benefits included increased revenue for the exchequer and better working conditions for labour. No, nationalisation was not the unmitigated disaster that Mr Burki and others make it out to be.It is important to identify the underlying causes for the stunted growth of our corporate sector. The underlying causes are easier to identify if we focus on one important sector — textile — which never faced the sword of nationalisation. This sector, in which Pakistan enjoys an inherent comparative advantage, has been the most favoured child of the state throughout our history. It has been showered with a wide range of “concessions” including low import duty on machinery, high levels of protection against import of textile products, area-specific income tax exemption and concessional project financing.Yet, the textile sector is crying out for more state crutches to compete internationally. Reared on subsidised raw cotton and created through state licensing mechanism and surviving on concessions, there has never been any incentive for the sector to grow and compete with “adults”.The textile business is cyclical in nature. Consequently, there are good years and bad years. In good years, surplus profits are set aside and partially invested in upgradation for enhancing productivity and efficiency so that in lean years businesses can live with lower margins.In Pakistan, the pattern has been very different. Surplus profits during good years have neither been distributed to shareholders, nor retained in businesses, nor used for upgradation or modernisation. They have either been stashed away out of the country or wasted on conspicuous consumption.During the bad years, there has been a familiar stampede in running to catch hold of the coat-tails of the government and pleading for more concessions. The most frequently used tactic is the threat of large-scale shutdown of manufacturing units. The state has been more than accommodating in responding to these distress calls. In 2006 alone, the loan write-offs and other forms of financial relief by the five largest banks (NBP, HBL, MCB, UBL, ABL) to textile companies aggregate to over six billion rupees.The sector is in crises yet again and the government is reportedly putting together yet another “concession package”. These are not likely to redress the fundamental structural problems. The sector is segmented with a large number of units of small size, lacking managerial capacity and marketing infrastructure, poor quality control and absence of the requisite skill sets among production workers. It is in the aforesaid areas where we have slipped sharply against international competitors.Unfortunately, there are no easy or quick solutions. Any effective turnaround would require a fundamental change in the mindset of textile magnates. They need to transform from a rentier class to one of entrepreneurs. Only then can they come to terms with the permanent change in the global trading paradigm in the post-MFA, post-WTO environment.The corporate leaders in India were not born in a day. They have been reared on the tradition of pursuing entrepreneurial flair, a high propensity to re-invest and to expand and diversify. The ramifications of globalisation were fully understood and the corporate sector was adequately geared to maximise opportunities. This confidence was based on the large size of individual corporate groups and the availability of a large pool of managerial manpower. It was, thus, only a matter of time before Indian corporates acquired a global status.Pakistan, on the other hand, both at the government and private sector level, has been far less prepared. This is the principal reason why we face this dilemma.Is there hope of a transformation? Sadly not. Our corporate sector has neither the vision nor is attuned to performing the role of entrepreneurs while lacking the requisite managerial and technical manpower that could enable us to graduate from a commodity producer and exporter to a producer and exporter of specialised products. There is hardly any other sector where the scale of operations or the level of technology can place Pakistan in the same league as India.It is not that we were destined to fall by the wayside. The private sector has consciously chosen to shy away from preparing itself to prosper in a competitive environment while the government has failed to create the human resource platform — an essential element of the enabling environment.The writer is chief executive of a financial sector company in Lahore.

AL-Qaeda raising money in Iraq to fund terrorists in Pakistan

Influx of Al Qaeda, money into Pakistan is seen
U.S. officials say the terrorist network's command base is increasingly being funded by cash coming out of Iraq.
By Greg Miller, Times Staff WriterMay 20, 2007

WASHINGTON — A major CIA effort launched last year to hunt down Osama bin Laden has produced no significant leads on his whereabouts, but has helped track an alarming increase in the movement of Al Qaeda operatives and money into Pakistan's tribal territories, according to senior U.S. intelligence officials familiar with the operation.In one of the most troubling trends, U.S. officials said that Al Qaeda's command base in Pakistan is increasingly being funded by cash coming out of Iraq, where the terrorist network's operatives are raising substantial sums from donations to the anti-American insurgency as well as kidnappings of wealthy Iraqis and other criminal activity.The influx of money has bolstered Al Qaeda's leadership ranks at a time when the core command is regrouping and reasserting influence over its far-flung network. The trend also signals a reversal in the traditional flow of Al Qaeda funds, with the network's leadership surviving to a large extent on money coming in from its most profitable franchise, rather than distributing funds from headquarters to distant cells.Al Qaeda's efforts were aided, intelligence officials said, by Pakistan's withdrawal in September of tens of thousands of troops from the tribal areas along the Afghanistan border where Bin Laden and his top deputy, Ayman Zawahiri, are believed to be hiding.Little more than a year ago, Al Qaeda's core command was thought to be in a financial crunch. But U.S. officials said cash shipped from Iraq has eased those troubles."Iraq is a big moneymaker for them," said a senior U.S. counter-terrorism official.The evolving picture of Al Qaeda's finances is based in part on intelligence from an aggressive effort launched last year to intensify the pressure on Bin Laden and his senior deputies. As part of a so-called surge in personnel, the CIA deployed as many as 50 clandestine operatives to Pakistan and Afghanistan — a dramatic increase over the number of CIA case officers permanently stationed in those countries. All of the new arrivals were given the primary objective of finding what counter-terrorism officials call "HVT1" and "HVT2." Those "high value target" designations refer to Bin Laden and Zawahiri.The surge was part of a broader shake-up at the CIA designed to refocus on the hunt for Bin Laden, officials said. One former high-ranking agency official said the CIA had formed a task force that involved officials from all four directorates at the agency, including analysts, scientists and technical experts, as well as covert operators.The officials were charged with reinvigorating a search that had atrophied when some U.S. intelligence assets and special forces teams were pulled out of Afghanistan in 2002 to prepare for the war with Iraq.Arduous searchNevertheless, U.S. intelligence and military officials said, the surge has yet to produce a single lead on Bin Laden's or Zawahiri's location that could be substantiated. "We're not any closer," said a senior U.S. military official who monitors the intelligence on the hunt for Bin Laden.The lack of progress underscores the difficulty of the search more than five years after the Sept. 11 attacks. Despite a $25-million U.S. reward, current and former intelligence officials said, the United States has not had a lead on Bin Laden since he fled American and Afghan forces in the Tora Bora region of Afghanistan in early 2002."We've had no significant report of him being anywhere," said a former senior CIA official who, like others interviewed for this article, spoke on condition of anonymity when discussing U.S. intelligence operations. U.S. spy agencies have not even had information that "you could validate historically," the official said, meaning a tip on a previous Bin Laden location that could subsequently be verified.President Bush is given detailed presentations on the hunt's progress every two to four months, in addition to routine counter-terrorism briefings, intelligence officials said. The presentations include "complex schematics, search patterns, what we're doing, where the Predator flies," said one participant, referring to flights by unmanned airplanes used in the search. The CIA has even used sand models to illustrate the topography of the mountainous terrain where Bin Laden is believed to be hiding.Still, officials said, they have been unable to answer the basic question of whether they are getting closer to their target."Any prediction on when we're going to get him is just ridiculous," said the senior U.S. counter-terrorism official. "It could be a year from now or the Pakistanis could be in the process of getting him right now."In a written response to questions from The Times, the CIA said it "does not as a rule discuss publicly the details of clandestine operations," but acknowledged it had stepped up operations against Bin Laden and defended their effectiveness."The surge has been modest in size, here and overseas, but has added new skills and fresh thinking to the fight against a resilient and adaptive foe," CIA spokesman Paul Gimigliano said in the statement. "It has paid off, generating more information about Al Qaeda and helping take terrorists off the street."The CIA spies are part of a broader espionage arsenal aimed at Bin Laden and Zawahiri that includes satellites, electronic eavesdropping stations and the unmanned airplanes.Pakistan pulloutCurrent and former U.S. intelligence officials involved in the surge said it had been hobbled by a number of other developments. Chief among them, they said, was Pakistan's troop pullout last year from border regions where the hunt has been focused. Just months after the CIA deployed dozens of additional operatives to its station in Islamabad — as well as bases in Peshawar and other locations — Pakistani President Pervez Musharraf announced "peace agreements" with tribal leaders in Waziristan.Driven by domestic political pressures and rising anti-American sentiment, the agreements called for the tribes to rein in the activities of foreign fighters, and bar them from launching attacks in Afghanistan, in exchange for a Pakistani military pullback.But U.S. officials said there was little evidence that the tribal groups had followed through."Everything was undermined by the so-called peace agreement in north Waziristan," said a senior U.S. intelligence official responsible for overseeing counter-terrorism operations. "Of all the things that work against us in the global war on terror, that's the most damaging development. The one thing Al Qaeda needs to plan an attack is a relatively safe place to operate."Some in the administration initially expressed concern over the Pakistani move, but Bush later praised it, following a White House meeting with Musharraf.The pullback took significant pressure off Al Qaeda leaders and the tribal groups protecting them. It also made travel easier for operatives migrating to Pakistan after taking part in the insurgency in Iraq. Some of these veterans are leading training at newly established camps, and are positioned to become the "next generation of leadership" in the organization, said the former senior CIA official. "Al Qaeda is dependent on a lot of leaders coming out of Iraq for its own viability," said the former official, who recently left the agency. "It's these sorts of guys who carry out operations." The former official added that the resurgent Taliban forces in Afghanistan are "being schooled" by Al Qaeda operatives with experience fighting U.S. forces in Iraq. The administration's concern was underscored when Vice President Dick Cheney and Deputy CIA Director Stephen Kappes visited Musharraf in Pakistan in February to prod him to crack down on Al Qaeda and its training camps.The Pakistani pullback also has reopened financial channels that had been constricted by the military presence. The senior U.S. counter-terrorism official said there were "lots of indications they can move people in and out easier," and that operatives from Iraq often bring cash."A year ago we were saying they were having serious money problems," the official said. "That seems to have eased up."The cash is mainly U.S. currency in relatively modest sums — tens of thousands of dollars. The scale of the payments suggests the money is not meant for funding elaborate terrorist plots, but instead for covering the day-to-day costs of Al Qaeda's command: paying off tribal leaders, hiring security and buying provisions.Contributors mobilizedAl Qaeda in Mesopotamia, as the network's Iraq branch is known, has drawn increasingly large contributions from elsewhere in the Muslim world — largely because the fight against U.S. forces has mobilized donors across the Middle East, officials said."Success in Iraq and Afghanistan is the reason people are contributing again, with money and private contributions coming back in from the Gulf," said the senior U.S. counter-terrorism official. He added that Al Qaeda in Mesopotamia also has become an effective criminal enterprise."The insurgents have great businesses they run: stealing cars, kidnapping people, protection money," the counter-terrorism official said. The former CIA official said the activity is so extensive that the "ransom-for-profit business in Iraq reminds me of Colombia and Mexico in the 1980s and '90s."U.S. officials got a glimpse of the Al Qaeda leadership's financial dependency when American forces intercepted a lengthy letter Zawahiri sent to now-deceased Iraq insurgent leader Abu Musab Zarqawi in 2005. In the letter, Zawahiri alluded to financial difficulties, saying "the lines have been cut off," and asked Zarqawi for fresh funds."We need a payment while new lines are being opened," Zawahiri wrote, according to a translation released publicly by the U.S. government. "So, if you're capable of sending a payment of approximately one hundred thousand, we'll be very grateful to you."The payments appear to have given Al Qaeda leaders in Iraq new influence in the organization, officials said. In particular, officials noted that Zawahiri appears to have abandoned his effort to persuade Sunni Arab insurgents not to divide Muslims by striking Shiites, and has more recently moved closer to sanctioning such bloodshed.U.S. officials believe they had Zawahiri in their sights on at least one occasion. Acting on reports that Zawahiri was to attend an Al Qaeda gathering in a remote village in northwest Pakistan in January 2006, the CIA launched a missile strike on the compound, missing Zawahiri but killing a senior Al Qaeda operations commander. U.S. officials believe Zawahiri changed plans at the last minute.Within months of that strike, the CIA began sending dozens of additional case officers to Afghanistan and Pakistan. The impetus for the surge is unclear. Several former CIA officials said it was launched at the direction of former CIA Director Porter J. Goss, and that the White House had been pushing the agency to step up the effort to find Bin Laden.But the CIA disputed those accounts, saying in its written statement that "this initiative was and is driven solely by operational considerations." The effort, according to CIA spokesman Gimigliano, grew out of an assessment in mid-2005 in which "the agency itself identified changes in the operational landscape against Al Qaeda."Several months before the surge, the CIA disbanded a special unit known as "Alec Station" that had led the search for Bin Laden. At the time, the move was seen as a sign that the hunt was being downgraded, but officials said it was a prelude to a broader reorganization.The surge included what one former CIA official described as a "new breed" of spy developed since the Sept. 11 attacks. These so-called "targeting officers" are given a blend of analytic and operational training to become specialists in sifting clues to the locations of high-value fugitives.The CIA's ability to send spies into the tribal region is limited, officials said. "We can't go into the tribal areas without protection," said the former CIA official who was involved in the planning of the surge. "For the most part they have to travel with [the Pakistan intelligence service] and their footprint is not small because they're worried about getting shot too."Instead, the effort is designed to cultivate sources in the outer perimeters of the security networks that guard Bin Laden, and gradually work inward. The aim, another former CIA official said, is "to find people who had access to people who had access to his movements. It's pretty basic stuff."
greg.miller@latimes.com

Afghan soldiers mass on border, ready and willing to take on old foe(Pakistan)

Afghan soldiers mass on border, ready and willing to take on old foe

In the late-morning lull that followed the thump of shellfire and chatter of machineguns, the preparations for a small war seemed to be unfolding in the orchards and paddy fields beneath the towering Spingar mountain range.
Scores of heavily armed Afghan troops and fighters from special border police units – determined, professional and evidently spoiling for a fight – gathered around their senior officers for orders. Artillery men waited beside their 122mm field guns hidden among the mulberry groves. And in nearby village bazaars tribesmen clustered around their elders, asking for weapons of their own so that they could join the fray.
Yet the enemy was not the Taleban, nor an infiltrating column of al-Qaeda fighters. Instead, in the remote border district of ’Ali Kheyl in eastern Afghanistan, Afghan security forces have found themselves pitted against an older and bigger enemy: Pakistan.
Clashes between the two neighbours – two of the West’s biggest allies in the War on Terror – began here last Sunday morning when Paki-stani forces fired on an Afghan post at Toorgawe, a strategic point on the border. The fighting is the most serious of its kind for years.
Since Sunday evening there has been a build-up of forces in the contested zone as hundreds of regular Afghan soldiers from the 203rd “Thunder” Corps, who had been fighting the Taleban, have deployed to the area to reinforce the beleaguered border police, bringing with them heavy artillery sent up from Kabul. “We can’t wait any more,” Brigadier Sanaoull Haq, a staff officer in the corps, said. “Now if anything further happens we will reply in kind.”
Each side accuses the other of initiating the bombardments, which so far have left 13 Afghans dead and 51 wounded. Foreign diplomats in Kabul fear that the situation, which has united Afghan nationalist sentiment across every ethnic divide, may escalate. It threatens to wreck any semblance of security cooperation between the countries, to the detriment of Nato’s struggle with the Taleban.
Tension has been growing for months along the 1,615-mile (2,600km) border shared by the two nations. Afghanistan has consistently accused the ISI, Pakistan’s intelligence service, of equipping and training Taleban fighters in camps inside Pakistan, then allowing them to cross into Afghanistan.
Pakistan has recently started building a security fence in selected areas of the border, ostensibly to halt the flow of insurgents. This, in turn, has provoked more Afghan wrath.
The Kabul Government does not recognise the border, drawn up by the British in 1893. Named the Durand line after Sir Mortimer Durand, then Foreign Secretary of the British Indian Government, the demarcation was intended to divide warlike Pashtun tribes antipathetic to British influence. Now Afghanistan sees the security fence as the de facto consolidation of a border dividing them from tribal areas in Pakistan that they claim as their own.
“The Durand line is a suffocating imposition under which we suffer,” said General Abdur Rahman, the chief of Afghanistan’s border police, as he briefed his men at Ghumruk, a customs post near the contested section of frontier, on Thursday. Seven of his men have been killed since the fighting started, yet he insisted that his orders so far were only to defend Afghan territory.
“We have donated our men’s blood to keep even a single foot of Pakistan from stepping inside our border,” he added. “But our orders from the Interior Ministry are to hold our positions, avoid trouble, and not fire unless fired upon.”
There was no security fence being built by Pakistan at Toorgawe. Instead, the Afghans say that their police in the post were attacked without warning simply because of its desirable strategic location.
“Wherever they see one of our border positions on a high pass they try to influence it,” said Brigadier Haq. “Since the Mujahidin times the Pakistanis have thought our country is their own. Then the Taleban came and still the Pakistanis could put up border posts wherever they wanted.
“Now we have a central government and an army of our own and the Pakistanis are angry. They can’t tolerate us or our border.” In the initial absence of regular troops hundreds of Pashtun tribesmen from local villages rushed to support the Afghan border police during the attacks on Sunday.
“We were carrying rifles, axes and swords,” said Nawruz, one of the tribesmen who participated. “I took 15 men with me from my village. We got into a trench and started firing back at the Pakistani militia. One of my friends died beside me, killed by a Pakistani mortar round.”
On Monday a joint Afgh-an-American delegation flew across the border for talks with Pakistani officers aimed at producing a ceasefire. The meeting was held in a schoolhouse in Teri Mangel, a small town in the Kurram tribal area of Pakistan. Yet after the negotiations concluded the delegation was fired upon. An American soldier was killed and four others wounded.
Though Nato and Pakistan, keen to play down the incident, say the attack was the work of a single rogue member of a Pakistani militia, two Afghan delegates present as part of the delegation who were separately interviewed byThe Times, Governor Rahmatullah Rahman and Colonel Shamsur, say they were fired on by up to a dozen uniformed Pakistani militiamen.
“There were two groups of Pakistani militia shooting at us,” said Governor Rahmatullah. “One group was placed among rocks and it fired at the delegation as it drove from the school to be picked up by a helicopter. The other group fired at the delegation’s security guards in the school’s courtyard. The attackers were in uniform. I saw at least ten.”
Despite this attack, a border ceasefire held until Thursday, when renewed artillery exchanges began in the morning and lasted until midday. Though both the Pakistani militia in Kurram and the Afghans in ’Ali Kheyl are Pashtuns of the same Zazi tribe, their kinship seems to be no barrier to the desire to fight one another.
“When it is a question of territory or land even if it is your own brother you don’t care,” said Malik Khir Gul Khan, one of the Afghan tribal elders.
“Under our code of Pashtun-wali if your brother takes your house or land then you have to kill him or die trying.”
So far Nato and American-led coalition forces have kept their forces away from the area of fighting, though Captain Aziz, an Afghan army commander at Ghumruk, said on Thursday that he had seen an eight-man team of American troops move forward to observe the clashes until they, too, were shelled and withdrew.
Afghanistan’s 46,000-strong army is in no position to take on the military might of Pakistan, besides which diplomatic pressure on both countries makes it extremely unlikely that the scope of fighting will spread between regular forces. However, the fighting has sparked antiPakistani sentiment among the Afghan border tribes at a time when the fortunes of every foreign player trying to stabilise Afghanistan are dependent on the two neighbours cooperating.
“Only this morning I have had tribal elders offer me 400 men to fight the Pakistanis,” said Captain Aziz. “I have to keep ordering them to stay in their villages. Man, woman and child, in this area they are all ready to give their blood in a fight with Pakistan.”

Pakistani paramilitary soldier killed American soldiers

‘Paramilitary man shot at ISAF delegates’
PESHAWAR: A Pakistani paramilitary soldier belonging to areas close to Waziristan shouted Allah-u-Akbar (God is great) and opened fire as he saw Americans on Monday, sources in Kurram Agency said on Tuesday. A Pakistani and a US soldier were killed moments after they walked out from a school building near the Pak-Afghan border in the Kurram tribal region after a “flag meeting” on Monday. “A paramilitary soldier, who belonged to the Bhittani tribe and was deployed there for the security of American and Afghan military officials, opened fire, and cross-fire followed in which he was killed,” the sources told Daily Times on condition of anonymity. Information regarding the paramilitary soldier’s involvement in the shooting was “obtained from different people”, the sources added. Military spokesman Maj Gen Waheed Arshad said he had “no information” that linked a Pakistani paramilitary soldier to the killing of the American. “I’ve no such information and an investigation has been ordered,” he told Daily Times. “I don’t have preliminary results of the investigation.” He blamed the attack on unidentified “miscreants”.The Associated Press quoted an unnamed US military official as saying in Washington that US soldiers had “gotten into a truck and were preparing to leave when a Pakistani militiaman walked up and opened fire. Return US fire killed the gunman.” Arshad said he did not see the Kabul-datelined AP story. The Bhittani tribe lives in areas from Tank to Lakki Marwat along the border with South Waziristan and is regarded as one of “the most conservative and fiercest” of all Pukhtoon tribes. iqbal khattak

DHS trying to restrict access of British citizens of Pakistani origin to the United States.

May 2, 2007
U.S. Seeks Closing of Visa Loophole for Britons
By JANE PERLEZ
LONDON, May 1 — Omar Khyam, the ringleader of the thwarted London bomb plot who was sentenced to life imprisonment on Monday, showed the potential for disaffected young men to be lured as terrorists, a threat that British officials said they would have to contend with for a generation.
But the 25-year-old Mr. Khyam, a Briton of Pakistani descent, also personifies a larger and more immediate concern: as a British citizen, he could have entered the United States without a visa, like many of an estimated 800,000 other Britons of Pakistani origin.
American officials, citing the number of terror plots in Britain involving Britons with ties to Pakistan, expressed concern over the visa loophole. In recent months, the homeland security secretary, Michael Chertoff, has opened talks with the government here on how to curb the access of British citizens of Pakistani origin to the United States.
At the moment, the British are resistant, fearing that restrictions on the group of Britons would incur a backlash from a population that has always sided with the Labor Party. The Americans say they are hesitant to push too hard and embarrass their staunch ally in the Iraq war, Prime Minister Tony Blair, as he prepares to step down from office.
Among the options that have been put on the table, according to British officials, was the most onerous option to Britain, that of canceling the entire visa waiver program that allows all Britons entry to the United States without a visa. Another option, politically fraught as it is, would be to single out Britons of Pakistani origin, requiring them to make visa applications for the United States.
Rather than impose any visa restrictions, the British government has told Washington it would prefer if the Americans simply deported Britons who failed screening once they arrived at an airport in the United States, British officials said. The British also screen at their end, and share intelligence with the Americans.
But Washington feels strongly, Mr. Chertoff has said, that it has the right to build controls against terrorists from Britain who do not have a prior criminal record — precisely the kind of man Mr. Khyam was until he was arrested in early 2004 and put on trial for plotting to blow up targets like a major London nightclub and a popular suburban shopping mall.
For its part, the British government looks with dismay at the frequency with which Britons travel to their ancestral land of Pakistan — an estimated 400,000 trips a year — where a small minority, like Mr. Khyam, link up with extremist groups and acquire training in weapons and explosives.
Foreign office officials have said they have discussed measures with the Pakistani Embassy in London, which grants Pakistani passports to Britons of Pakistani descent, to consider tightening the rules for Pakistani travel documents.
In Washington, an expert on terrorism and Pakistan, Bruce Riedel, who served on the National Security Council under President Clinton and in the early Bush administration, and who recently retired after 30 years in the Central Intelligence Agency, said that Mr. Khyam was perfect material for Al Qaeda.
“He is the classic U.K.-Pakistani connection that Al Qaeda has focused on since 9/11,” said Mr. Riedel, who is now a senior fellow at the Brookings Institution in Washington. “His U.K. passport gives him international mobility. His training at a camp run for Kashmiris by Pakistan’s Inter-Services Intelligence agency gives him expertise. Al Qaeda gives him direction.”
The trial that ended Monday with the conviction of Mr. Khyam and four other Muslim men on conspiracy charges did not establish whether Mr. Khyam or his colleagues belonged to a Qaeda cell.
But the head of counterterrorism at Scotland Yard, Peter Clarke, said after the verdict the investigations into the bomb plot had given “a new understanding of the Al Qaeda threat to Britain.”
At his sentencing, the judge, Sir Michael Astill, described Mr. Khyam as “the energy behind the conspiracy,” the man who attracted other young Muslims to the plan, and inspired them, and who knew how to shuttle from Britain to Pakistan for terrorism training.
From Mr. Khyam’s own testimony, as well as a cascade of official intelligence surveillance presented during the yearlong trial, a portrait of determination and ruthlessness emerged.
As a teenager, Omar became entranced by jihadist ideology. He moved on to the cause of Kashmir, and was then piqued by 9/11 and the Iraq war, things that inspired and angered other Britons with Pakistani roots. But he in the end turned to attacking Britain, where he was born and raised.
Asked on the witness stand his reaction to 9/11, Mr. Khyam did not disguise his delight.
“I was happy,” he recalled in his south England accent. “America was, and still is, the greatest enemy of Islam. I was happy that America had been hit because of what it represented against the Muslims, but obviously 3,000 people died, so there were mixed feelings.”
Mr. Khyam testified that his parents migrated to Britain from Pakistan in the 1970s, before his birth. He came from a family, he said, with a proud heritage of service, first in the British Army in Pakistan, then in the army of the newly independent Pakistan, and also in the intelligence services.
His parents were not particularly religious, he said, a pattern typical among Pakistani immigrants to Britain where the new generation, often turned off by what they see as the loose morals of binge drinking and broken marriages, has proven to be more devout than their elders.
At the age of 10, his father, a successful businessman with a textile factory in Karachi, left his mother and moved to Belgium, leaving behind Omar, the eldest, and two small children.
His mother’s English was poor. Quickly, Omar became the man of the household, organizing the finances, and bossing his siblings. Instead of enrolling in the local school where most of the students were South Asian, he attended a mostly white, government-run school, and led a middle-class British life.
He did relatively well in his final school exams and enrolled in college but, distracted by his larger cause, never followed through on his studies or sought steady employment.
By 1998, he had taken his first steps into the realm of radical Islam, when he was introduced to Al Muhajiroun, a group led in Britain by Omar Bakri Mohammed, in his neighborhood in West Sussex. The group indoctrinates followers in the virtues of an Islamic state and indoctrinates a strict code of personal behavior. It expects members to shun friends who do not practice strict Islamic mores.
On the political side, Mr. Khyam calmly told the court about how he watched bloody videotapes of Russian soldiers blowing up mosques in Chechnya, and of atrocities by the Serbs against Muslims in Bosnia, which were shown to members of Al Muhajiroun.
But he soon tired of Al Muhajiroun, he said, and yearned for something more than the group’s desire for an Islamic state in Britain, which he deemed to be “not realistic.”
He took his first trip to Pakistan as a vacation with his mother and his brothers in 1999, when he was just a teenager. There, he experienced firsthand what he had heard about at home: the cause of Kashmir, the border area claimed by both Pakistan and India. He met with a group, Al Badr Mujahedeen, that fought, he said, to free Kashmir from Indian control.
In early 2000, Mr. Khyam was back in Pakistan. He found a training camp for fighters being sent to Kashmir that was run, he said, by Inter-Services Intelligence.
According to his testimony, the American-led war in Afghanistan, and later Iraq, dramatically colored his views. Those wars, he said, were wars against Islam, and he hoped to join the fight.
“By this time I had a lot of contact with the I.S.I. because of my family,” he said, referring to the Pakistani intelligence service. He visited the headquarters of the agency in Islamabad, and was told that what the Americans wanted “is to stop anyone who calls for the return of an Islamic state or a caliphate.”
From 2002 on, Mr. Khyam said he shuttled between Britain and Pakistan, culminating in a trip in 2003 to a training camp in Malakand in the North-West Frontier Province with five of his fellow defendants, including his younger brother, Shujah, who was acquitted.
By late 2003, according to prosecution evidence, Mr. Khyam had decided from his trips to Pakistan to concentrate on a plot in Britain that would involve a fertilizer bomb.
Mr. Khyam, using some of the organizational skills he had honed as a young man at home, can be heard on surveillance tapes divvying up responsibilities for the plan.
Along the way, he found time to marry — in what he called a “religious marriage” — Saira, a Pakistani woman.
They finally married in a civil ceremony on March 25, 2004, and a few days later, Mr. Khyam was arrested by the police in a bedroom of a Holiday Inn in England while he was on his honeymoon with his wife.

Pakistan among top 10 worst offenders of press freedom

Pakistan among top 10 worst offenders of press freedom
NEW YORK: Pakistan is among the top 10 worst countries for press freedom, a US-based media watchdog said on Tuesday. Other worst countries for press freedom are Ethiopia, Gambia, Russia, Democratic Republic of Congo, Cuba, Egypt, Azerbaijan, Morocco and Thailand. “The behaviour of all of these countries is deeply troubling, but the rapid retreats in nations where the media have thrived demonstrate just how easily the fundamental right to press freedom can be taken away,” said Joel Simon, executive director of the Committee to Protect Journalists, in a statement.The Committee to Protect Journalists assessed countries by looking at government censorship, legal harassment, libel prosecutions, journalist deaths, physical attacks on the press, journalist imprisonments, and threats against the press. Major conflict zones like Iraq and Somalia were excluded because they lacked conventional governance and news gathering.Ethiopia topped the list with the number of jailed journalists rising to 18 from two and dozens more exiled between 2002 and 2007. In 2006, CPJ said eight newspapers were banned, two foreign reporters expelled and Web sites blocked. In Gambia prominent journalist Deyda Hydara was shot dead in 2004, and leading newspaper “The Independent” was targeted by arsonists and then shut down by the government, CPJ said.Russia came in at number three because all three national television channels were state run and 11 journalists killed in five years with none of the cases solved, the report said. In the Congo, two journalists had been killed since 2005, attacks on media workers had risen to nine from three and the leaders of press freedom group “Journaliste en Danger” were forced into hiding in 2006, CPJ said. “These three African nations, as diverse as they are, have won praise at times for their transition to democracy, but they are actually moving in reverse on press issues,” said Simon. Cuba is number five, Pakistan six, Morocco nine and Thailand 10 on the CPJ list. reuters